Gift cards are a booming business in Canada and you can find gift cards at most retailers and places of business. They provide convenience and flexibility for users and eliminate the need to search for gifts when time or gift ideas are limited.
Gift cards allow users to choose items they really want and thus can help reduce or eliminate item exchanges or returns.
Gift cards come in different forms including those that can be used at a particular store, those that can be used at a group of stores such as a mall, and credit card gift cards that are accepted wherever the branded credit card is accepted.
In recent years, some retailers like Wal-Mart and Safeway have started to provide many different gift cards from various retailers in a convenient spot usually beside the front checkouts.
One major provider of these gift cards is Blackhawk Network, which is an innovator in the digital gifting industry. The company reported that 7 out of 10 Canadians prefer to receive gift cards instead of gifts.
Blackhawk manages gift card placement and oversees the physical and digital distribution of cards. It connects over 600 leading consumer brands and over 180,000 global retail distribution locations. It provides access to over an estimated 300 million consumer visits per week.
Safeway recently divested the Blackhawk business and will continue to sell Blackhawk’s full range of prepaid products including prepaid gift cards, prepaid telecom products and general purpose reloadable debit products.
InComm is another company with global gift card operations. The company operates an extensive network of gift cards across Canada.
Gift cards have the impact of shifting sales to different periods. For example, consumers may purchase many gift cards over the Christmas season, but sales are not recorded on financial statements at this time.
Instead, sales are recorded when the gift cards are redeemed, which usually happens up until the end of February, but can occur later. As a result, companies may experience an uptick in January sales, which has typically been a slower period.
Some gift cards may never even be redeemed or may be redeemed a long time after they are bought. This has the effect of providing retailers with up-front cashflow.
In December, Wal-Mart announced a new test program that will let customers exchange gift cards from more than 200 retailers, airlines and restaurants for a Wal-Mart card.
CEB TowerGroup estimates that up to about $1 billion worth of gift cards will go unused this year due to card loss or purchase indecision.
According to CEO Elliot Bohm of CardCash, Canada’s largest gift card exchange website, Wal-Mart gift cards are the most popular gift cards on CardCash.
Under the new Wal-Mart test program, shoppers will not receive the full value of gift cards, but instead will receive different amounts depending on which gift card is held.
For example, customers will be able to redeem up to 95 per cent from Amazon.com, up to 90 per cent from Staples and up to 85 per cent from The Gap. Some gift cards may only garner up 70 per cent.
Wal-Mart spokesman Ravi Jariwala stated that the company recognized the opportunity of the new gift card program since “A large number don’t get redeemed. We figured this was a good way to get gift cards in the hands of more customers.”
Consumers may actually spend more than the face value of the gift card while in a store. For example, if a customer has a $100 gift card for Wal-mart, they may decide to buy a $600 television since $100 is a substantial savings towards the cost of a television set.
In 2011, analyst Brian Riley of TowerGroup estimated that more than a third of gift-card purchases go over the face value of the card.
Many cards are reloadable so that after the gift card balance has been eliminated, consumers can decide to place another dollar amount on the gift card to use again for more purchases. Starbucks is one food service company where this method is frequently used.
Another benefit to gift cards is that they allow retailers to track customers’ purchasing habits.
Retailers are creating gift cards for different occasions and this also promotes giving and more gift card sales for these occasions.
For example, last month consumers could purchase $10 pink iTunes gift cards at Wal-mart right before Valentines Day. These made great gift cards to give for the holiday.
Retailers can focus on marketing by creating cards with great visual appeal that incorporate great colors and designs that catch shoppers’ eyes.
Other gift card themes include holidays such as Christmas, Halloween, Back to School, Mother’s Day, graduation and many more.
Some retailers also provide unique envelopes, boxes or bags with which to enclose gift cards.
A 2006 Statscan report found that gift cards were popular among home electronic and appliance stores, general merchandise stores, and furniture stores. However, many other stores have been catching up.
These days it seems as though almost all retailers and food operators offer gift cards and this makes gift card competition fierce. There will always be a gift card we can purchase from a retailer or food operator that will help ensure we are providing gift card recipients with an attractive gift of their choosing.